Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

Archive for May, 2010

The continuing Kettering saga

Posted by John Beech on May 30, 2010

The descent of Grays Athletic must have struck a worrying chord with Kettering fans.  Back in January I blogged on their tribulations (under Kettering Town and the Enigmatic Imraan Ladack) in finding somewhere to play as the lease on their stadium comes to a conclusion, and will not be renewed.  He had at that point become disillusioned following a protracted confrontation with the Football Association, and announced that he was standing down as Kettering’s Chairman.

Last month he paid the fine he owed the FA and resumed the role of Kettering’s Chairman (1).  Not only was he back, he was back at his enigmatic best.  Consider this exchange in an interview with Jon Dunham of the local Evening Telegraph (2):

JD: “Do we still call you the ‘owner’ or will you be returning as chairman, as was stated on the website when it said you would be resuming your duties as chairman?”

IL: “I will chair board meetings.”

So, presumably he is Chairman again, but was rather less committal on whether he remains owner.

Another classic exchange in the interview was:

JD: “Can you either confirm or deny the popular rumour about Kettering Town and Rothwell Town merging?”

IL: “I can deny this is a popular rumour.”

I would have to admit that I not only find his answer enigmatic, but also devoid of meaning.

Rothwell Town, which is just over four miles from Kettering and the AA website suggests a driving time of 10 minutes between the stadiums, play in the Southern League Division 1 Midlands, and are in financial difficulty, with debts reported to be £350,000 (3).  Things have reached a point that the club has now been forced to withdraw from the Southern League for the coming season (4).

One option would be to sell their social club and car park land, but, from what I can gather, using the social club is probably a more popular activity than attending football matches.  It would also seem that the it is the social club which is at the root of the debts.

A second option would be to find a new benefactor, and at least one name is in the frame – Pino Colonna, already a director of Rothwell Town (5).  Before his name appeared as a would-be saviour, another benefactor had come forward – one Imraan Ladack (6), offering to pay off Rothwell town’s debts.  Precisely what he and Kettering Town might get out of such a deal remains unstated, if open to obvious speculation.  However, Ladack has subsequently withdrawn his offer to Rothwell (7).

His focus now seems to be back at Kettering Town’s Rockingham Road.  Options he is likely to be exploring are purchase of the ground from the landlord and/or negotiating a new lease.  Perhaps he is even trying to rebuild bridges with Kettering Borough Council so that alternative sites for a new stadium in Kettering can be explored.  Time is running out though – the club’s lease (which it first acquired on a sale-and-lease-back basis in the eighties) expires in 2012.  The pressure is on Ladack to avoid following the path of Grays Athletic.

[Does anyone have any news on what is happening at Cromer Town, where the lease on their ground is also due to expire in 2012?]

Posted in Assets, Benefactors, Ownership, Stadium | Tagged: , , , | 2 Comments »

The Top 91 Clubs?

Posted by John Beech on May 29, 2010

The uncertainty and overall shambles characterising the allocation of clubs next season in the Non-League divisions (see Appendix E: Tough Love for Salisbury City?) is in danger of spreading to the Football League.

Grimsby Town, together with Darlington, occupied the two bottom slots of League 2 at the end of the season just gone, and are therefore relegated.  Stockport County, who finished bottom of League 1 and are thus destined for League 2 this coming season, remain in Administration, having entered that state back in April 2009.  Football League rules state that a club cannot enter two consecutive seasons in Administration, and, unless Stockport County rapidly get their act together to come out of Administration, they will be ineligible to begin the coming season in League 2.

Perhaps not unsurprisingly, Grimsby Town approached the Football League to enquire whether Stockport County’s failure to come out of Administration would mean they (Grimsby, having finished bottom but one) would then be reprieved.

The answer they received from the Football League is that they would not be reprieved should Stockport fail to come out of Administration, and “according to Football League rules, we would operate with 23 clubs in League Two next season” (1).

Now, some might see Grimsby’s attempt to gain a reprieve as clutching at straws and that they should just quietly accept relegation.  That is a matter for debate.  But what is a matter of fact is that Football League rules, designed to punish a club for financial misdemeanours (in this case, Stockport, who are not even actually in League 2), would result in one League 2 club every Saturday next season sitting twiddling its thumbs and failing to take much needed revenue at the turnstiles.  In other words, the Football League would have contrived to hit every club in League 2 financially as a result of the financial misdemeanours of a previous season’s League 1 club!  It frankly defies belief.

No doubt Grimsby would also point to the case of Forest Green, potentially reprieved in the Conference National if Salisbury City are ejected for financial problems.  But then, consistency never was a strong point of football governance.

Posted in Football League, Governance, Pyramid movement, Relegation | Tagged: , , , | 2 Comments »

The descent of Grays Athletic

Posted by John Beech on May 28, 2010

As I said in my last blog post Appendix E: Tough Love for Salisbury City?, Grays Athletic face a rather worse fate rather than straightforward relegation to the Conference South.  It’s a depressing tale, and one can’t help feeling it was an accident waiting to happen to a club.

The club had faced and survived a crisis at the beginning of the eighties.  In 1981 they seemed to have achieved a significant measure of stability when, as it still says on the club website (1 ) as I write, “the Club Patron, Mr. Ron Billings, ensured the future of Grays Athletic at the Rec by purchasing the ground“.  What it doesn’t mention is that Ron Billings and his family were  property developers (oh dear, you can almost guess at this point the way this is going to go).

Shortly after this, new management came in, and the club started to make progress.  In 1983 however, a fire destroyed the main stand, but again benefactor Ron Billings stepped in, building the Ball Court Complex which included Dressing Rooms, Club Room and Bar (2).

In 1990 a new 20-year lease was signed and all still looked well, but it is the coming to an end of this lease that has precipitated the current crisis.  It needs pointing out though that the club has had twenty years to prepare a ‘plan B’ in case the lease was not renewed.

Ten years ago Micky Woodward appeared on the scene.  He’s a difficult man to summarise – ‘eccentric’ springs to mind, as does ‘inconsistent’.  For example, in 2003 he tried to buy Peterborough United (3), but, having failed, turned Grays into the first club beyond the Conference to be full-time (4).

As Chairman/Director of Football Woodward has had, well, unusual relationships with his managers.  At the end of May 2006 Woodward recruited Frank Gray as manager (5), only to sack him five months later (6) and to take on the managerial role himself (7).  “Why pay someone else to run the club when I can do it?” as he put it.  Three weeks later he seemed to have found the answer to this rhetorical question, appointing Andy King as manager (8).

By the end of 2006 Woodward had started to address the issue of a stadium lease due to run out in 2010.  It was reported that Woodward had an option to buy the New rec from the Billings family, and would sell it fund a new 5,000 capacity stadium nine miles away (9).  Given the density of football clubs, all with strong local identities, it is perhaps not surprising that reaction was at best mixed.  In preparing these plans, Woodward felt that Thurrock Council had not been very supportive (10).

Shortly afterwards Woodward appointed manager Gary Hill as Director of Football (11), only to announce three hours later that Hill had changed his mind (12).  A few days later he had to admit that in fact he had withdrawn the offer to Hill rather than Hill withdrawing his acceptance of the post (13).

Woodward has over the last few years faced opposition and abuse from fans, never courting cheap popularity.  These confrontations led on one occasion to Woodward even threatening to take the club back to the Essex Senior League (14), a threat which has unfortunate resonances today.

By November 2007, sites were still under consideration for a new stadium, but there was talk of temporary ground-sharing (15) as the clock ticked on.

In February 2008 it was again ‘goodbye’ to a manager (Justin Edinburgh this time) and Woodward, obviously forgetting the answer to his previous rhetorical question, took over again as manager (16), even planning a long stay in the post (17).  In September he again reacted to criticism from fans, announcing that he was putting the club up for sale (18).

At the start of the following season players were forced to take a pay cut following the withdrawal of sponsorship (19), and players were allowed to leave (20).   Woodward was reported as saying the club  “would have ceased to exist within six months without drastic financial cutbacks” (21).  Following a succesful Cup run, the wages were however paid (22).  As the season progressed, players were nonetheless released (23).

At the start of this season Woodward stepped down as Chairman and Chief Executive, but remained a director (24), again citing fan abuse, although not offering a considered analysis of the causes of the abuse.  Since then there have been a number of changes at board level, Andy Swallow being progressively described as Deputy Chairman, Chairman and most recently owner.

Attempts at interim ground-sharing all seem to have come to nought, and the club has found itself facing the drop not into the Conference South, and not even into Isthmian League, the Football Association declining to allocate the club a place there.

What will happen remains distinctly unclear.  An appeal has been launched with the FA against the decision to place them in Step 5 (25), but without a ground there seems a very real possibility that no team will be turning out season.  A newly formed Supporters Trust, GAFC 1890, has weighed into the battle, but they have arrived late and face an almighty upward battle.  The Billings family had previously offered to put £700,000 towards the cost of new ground, but time is running out.

Grays Athletic offers not only evidence of the flaws in the benefactor model, but also the dangers of the separation of stadium ownership from club ownership.  Let us hope lessons are learned, and, with a will, and a massive dash of luck, they will not have been learned to late at Grays.

[The situation at Grays is complex and apparently subject to rapid change.  It has not been widely reported other than in the local press.  Any factual input as comments from informed observers on developments would be appreciated.]


GRAYS UPDATE – 18 June 2010

Mixed news for Grays. They have won their appeal against effective demotion to the Essex Premier League, and should now start in the Isthmian Premier League (1). While this solves one problem, it complicates the issue of where they will groundshare (2).

The bad news is that the club has been served with a winding-up petition by HMRC (3).

Posted in Benefactors, Football Association, Football Conference, Governance, Pyramid movement, Relegation, Stadium, Trusts | Tagged: , , , , , , , | 1 Comment »

Appendix E: Tough Love for Salisbury City?

Posted by John Beech on May 23, 2010

This is the time of year that anorakies like me start to change our data files to reflect the promotions and relegations which are about to take place officially.  If you think that is already a straightforward task, barring the odd play-off final, then you are forgetting what is happening in the Conference and lower leagues.

The bottom of the Conference National table finished thus:

18  Histon – 46 points
19  Eastbourne Borough – 46 points
20  Gateshead – 45 points
——————————————
21  Forest Green – 45 points
22  Ebbsfleet United – 44 points
23  Grays Athletic – 26 points
[24  Chester City - folded; record expunged]

A close run thing then, but, given Chester’s unfortunate demise, you would expect to see Forest Green, Ebbsfleet United and Grays Athletic heading for the Conference Regionals.  But apparently “there are still a number of outstanding issues to be resolved and the listing my be subject to subsequent change.”  Well, indeed there are, and even the FA list (1) is not up-to-date given various appeals that may or may not be made.

Here is the most glaring of the complications:  Salisbury (12th; 58 points).

Salisbury’s recent troubles came to a head last year, when Chairman Neville Beal and the rest of the board resigned, putting the club up for sale with the price tag of just £1 (2), although with the condition that any new purchaser would have to pay off all debts.

Two initial prospective buyers fell by the wayside (3), but sponsors In-Excess stuck with the club(4).  In early September however, HMRC sought a winding-up petition for approximately £200,000 (5), and the club sought the protection of going into Administration (6), bringing with it the inevitable ten-point deduction.  (Without this, Salisbury would have finished the season just outside the play-off zone.)

After protracted negotiation, in January a consortium led by William Harrison-Allan bought the club (7), and a transfer embargo was lifted, and an agreement with HMRC was reported to have been reached (8). By the end of February a CVA had been agreed (9), and the climb onwards and upwards, both on the pitch and financially appeared to have begun.

However, at the beginning of April the owners of the club’s stadium, Old Sarum Stadium Ltd., rather unhelpfully announced that they wanted to develop 150 houses on the site (10).  Far worse was to come – the club was to become a victim of Appendix E.

How is it then that the club should find itself precluded from playing in the Conference next season?  After all, the club’s directors stated this week (11) that:

During this period [since they took over the club] all salaries, payments to suppliers and other liabilities have been met in full. We have upgraded the floodlights system as directed by the FA and Football Conference to meet BSP status, paid all football creditors, and also met our requirements under the CVA and all other footballing responsibilities to the Conference and FA.

Appendix E had been used by the Conference against Northwich Victoria last season, but that club successfully appealed.  An FA panel ruled that Appendix E, which ordered expulsion as punishment for entering Administration, contradicted another rule that said a ten-points deduction was an appropriate sanction (12).  Appendix E was reviewed at the Conference AGM last July, but quite what happened is not clear, as this Non-League Paper report (13) of the AGM suggests:

John Palmer [of Farsley Celtic] said: “I do not believe this was voted upon. I have spoken to two or three chairman in this league and they know nothing about the amendment.”

Northwich chairman Jim Rushe agreed. “I don’t care what they say, they did not change any rules,” he said.

“It was in the agenda, but when the item came up they said that in light of the FA not ratifying Appendix E, it would not be debated and nobody voted on it.”

But a Conference source says the clubs were duped.

“The AGM agenda was a shambles. They were referring to Item 8, which was actually Item 6, and then Dennis (Strudwick) got his knickers in a twist when it
came to talking about rule changes.

“There was no debate, no discussion, nothing. In the end, all the rules were voted through – and people didn’t even vote! People simply didn’t realise what they were doing.”

So quite what the exact situation is with regard to the rules and regulations in Appendix E is open to doubt.  What a shambles, and even more so as Appendix E is due to be discussed again at the next AGM in July.  Here’s hoping some sensible and clear decision is made.

Which brings me to a second complication:  Darlington, relegated from League 2, and thus due to join the Conference.  Darlington went into a CVA in June 2009 which did not see full repayment to the club’s creditors (14).  Football creditors got full repayment, but all other creditors received only 0.9p in the pound.  Salisbury fans will look at Darlington’s acceptance into the Conference with incredulity.  According to Appendix E:

…In the event of a Football League club entering the competition subject to any Insolvency Event then…that shall not make the club ineligible from membership.

In the event of any Football League club suffering, undergoing or entering into an Insolvency Event in its first season in the competition and being still subject to that Insolvency Event by the date of the annual meeting at the end of its first season in the competition then that…shall not make the club ineligible for membership the following season.

In other words, less stringent conditions apply to a club dropping down to the Conference than apply to clubs such as Salisbury already in the Conference!

If Salisbury do end up being expelled, Forest Green will be the lucky recipients of a reprieve, and, again Salisbury fans may find this hard to stomach.  Forest green have not exactly been an exemplar of best practice in football finance and management of late.  At the end of March they came within a hair’s breadth of a winding-up order from HMRC (15) over a debt of £42,000, and admitted to needing investment of £250,000 to £300,000 to survive.  Just over a week ago they were advertised as for sale in the Financial Times (16).

Before any Forest Green fan finds it necessary to leap to the defence of their board, let me make clear that I am not directing my criticisms in that direction (in this posting at least!).  What I find ludicrous is that

  • promotion and relegation in the Conference National is increasingly being decided by matters that have nothing to do with on-the-pitch performance;
  • rules are being applied that many seem unsure were clearly posed and democratically voted in;
  • new regimes trying to bring clubs to a healthier financial state are being impeded from doing so;
  • different, slacker, rules are applied to clubs coming down from the Football League;
  • rules in the Conference are significantly different from those in the Football League and the Premier League.  Where would Portsmouth and other financial miscreants find themselves if they were subject to Conference rules?  There needs to be a tad more consistency in the rules as they are applied across the three governing bodies.
  • football creditors must get full repayment of debts, at the expense of HMRC and a club’s suppliers who are small businesses and even charities.

The shambles being faced by these clubs in the Conference National is repeated further down the pyramid.  Northwich Victoria are falling foul of Appendix E and are considering a joint appeal with Salisbury (17).  Grays Athletic find themselves in free fall rather than moving to the Conference South (14).  But if I don’t leave those extensive issues to a later posting, I’ll not keep this posting to even a semi-reasonable length!


CHESTER UPDATE – 26 MAY 2010

Chester’s resurrection club is over half way to raising the £100,000 it needs to get up and running (A).  It is not being helped by the FA’s indecision in finalising which tier it is to play in.  Without that decision, the club cannot sell season tickets, thus it has a cashflow problem.

The new club website is here.


SALISBURY UPDATE – 10 JUNE 2010

Salisbury City have lost their appeal and will now be demoted two divisions (B). As a result, Forest Green have been reprieved in the Conference National, and Weston-super-Mare have been reprieved in the Conference South.

Ridiculous!

Posted in Debts, Football Association, Football Conference, Governance, HMRC | Tagged: , , , , | 4 Comments »

A Political Football

Posted by John Beech on May 20, 2010

In the lead up to the general election (and running alongside a large number of local council elections), I blogged on how I thought it significant that the political parties were wooing the fan vote, but did not hold out much prospect for major new initiatives actually happening after polling day.  Well, as many a commentator has pointed out, the public have now spoken, although it’s not entirely clear exactly what they were saying.

Cameron has already come in strong support of the 2018 World Cup bid, indicating that he is happy to comply with whatever is necessary, by implication including the waiving of tax bills (see FIFA’s muscle flexing).  Apparently singing from a different hymn sheet, the new Conservative Minister for Sport, Hugh Robertson, has indicated in no uncertain terms to the football authorities that “they must reform their governance and power structures or face the prospect of external regulation” (1) – something which would not exactly be looked kindly on by FIFA, who tend to suspend national football authorities that suffer from governmental interference.  We shall see.

On the opposition benches, we now have an increasing number of runners for the post of leader of the Labour Party, the most interesting one of which, from a football perspective, is Andy Burnham, former Culture Secretary.

All then is far from clear with respect to future political strategy and the beautiful game/ugly business.  I thought it would be interesting nonetheless to look at how the political representation has changed in the light of the election results, that is, with respect to the changes in constituency representation of clubs.  So far I have only looked at Premier League clubs, but plan to extend this to at least the Championship as time permits.

It would be easy to make far too much of who the local MP is for clubs from a fans perspective.  Clubs draw fans from a much wider area than just the constituency in which their stadium sits.  How many declared Manchester United fans, for example, could tell you that Old Trafford is in the Stretford and Urmston constituency?  How many have even heard of Urmston for that matter?

The local MP is however the natural point of contact for a club to raise its political concerns with, especially if there really is going to be imposed reform.  With regard to Premier League clubs, this comprises a grand total of not twenty MPs, but in fact eighteen.  The stadiums of Aston Villa and Birmingham City are both in the Birmingham Ladywood constituency, and Chelsea and Fulham both find themselves in the appropriately named Chelsea and Fulham constituency.  An interesting thought is that Greg Hands, MP for Chelsea and Fulham, could in theory find Abramovich and Fayed sitting in his surgery waiting to rant on!

A first looks shows the following:

  • Of the 18, 14 are LAB, 2 CON and 2 LibDem.  However, as of June 3rd, when relegations officially take place, both LibDems disappear from the list (they are the MPs for Burnley and Portsmouth) to be replaced by LAB MPs (whatever the outcome of the Play-Off Final).  The two CON MPs are the said Greg Hands, and Paul Uppal, who represents Wolverhampton South West, a CON gain from LAB.
  • In only four constituencies did the swing exceed the average swing in England (5.6% from LAB to CON) – Bolton West, Chelsea & Fulham, Stoke-on-Trent South, and Wigan.  7 swung to CON, 4 to LibDem, and 7 to LA, the most marked case being a 7.7% swing from CON to LAB in East Ham (home of West Ham United).  Other anomolies were swings from LAB to LibDem in Hull West & Hessle (7.9%), where Alan Johnson is still the MP, and Burnley (9.6%).

The overall picture is a tad messy, but in general these Premier League constituencies are now in opposition hands, as they normally have been, largely because the LAB vote held up better than elsewhere in England.

Of more direct relevance to the day-to-day running of clubs, and their planning applications, are local councils. Yesterday alone, for example, I found two news stories involving Premier League clubs and their respective local councils (in both cases, examples of conflict).  Tottenham Hotspur have had to revise their planning application to Haringey Council for their ground development because it has originally proposed the demolition of four Grade II listed buildings (2).  At Stoke, “Furious councillors have slammed a Government watchdog after a long-awaited audit report [on the Britannia stadium] was hit by yet more delays” (3).

In spite of covering numbers of voters than parliamentary constituencies, we are left with eighteen different councils (and exactly the same duplication as with constituencies).  Initial findings are:

  • LAB control eight councils, LibDem 3 (but these are the relegated Burnley, Hull and Portsmouth), CON 2, and 5 with No Overall Control (NOC).  The ‘new boys’ for next season are Newcastle (LibDem) and West Bromwich (LAB), plus either Blackpool (CON) or Cardiff (a coalition of Plaid Cymru and Independents).
  • LAB made three gains, two from LibDem and one from .  Neither CON nor LibDem made a single gain.

As I said above, it is easy to make too much of all of this.  What is clear though is the Premier League clubs find themselves represented in parliament mainly by Labour, now in opposition, and similarly Labour at council level, more typically in control.  This is as it has been historically, except of course that Labour are now in parliamentary opposition.  Generally this would be interpreted as bad news for the Premier League clubs, but perhaps the ‘new politics’ of coalition will see the Conservatives and the Liberal Democrats maintain their apparent impetus to woo the ‘football’ vote.

If they really are to survive a fixed five-year period in power, they will at the very least have to take more considered positions than the two knee-jerk responses I referred to above by Cameron and Robertson.  They will also have to think carefully where they stand as the UEFA Financial Fair Play Protocol comes inevitably into operation.  Will they take a ‘free-marketeer’ approach, placating the Premier League oligarchs and antagonising UEFA, or will they support a growth in fan ownership, an increase in their support of Supporters Direct being an obvious way to show this?

Posted in 2018, Governance, Politics, Premier League | Tagged: , , , | Leave a Comment »

Supporters Direct Conference 12-13 June

Posted by John Beech on May 18, 2010

Details here

Posted in Uncategorized | Leave a Comment »

Warring at Walsall

Posted by John Beech on May 16, 2010

Rising up the pyramid when there are larger iconic clubs geographically close to you is always going to be difficult, because the size of potential fan base is constrained.  In the case of Walsall (League 1), within ten miles they have West Bromwich Albion (Premier League next season), Wolves (Premier League), Aston Villa (Premier League), and Birmingham City (Premier League).  That is not to suggest that Walsall is not capable of having a committed set of ultra-loyal fans; rather, it is to suggest that when ambition for the club is mentioned, it needs to be tempered with some realism.

The club was an early mover into a modern stadium, the Bescot opening in 1990.  It has a capacity of over 11,000, and conference facilities, allowing non-matchday revenue streams.  Its form in modern times has seen it fairly stably around its current level in the pyramid.  The size of the stadium has not really been a constraint, and of late it has not been well filled.

After a period of considerable turbulence, the club was taken over in 1988 by a consortium led by Maurice Miller, who appointed two directors, Ray Clift and Jeff Bonser.  Within ten years, Bonser was Chairman, a position he still holds, and owner of the stadium.  (For more on this turbulent period and the early years of this regime, a particularly useful source was a series called The Long Road to Bescot published on the Walsall-Mad website, but now seemingly taken down.*)

Given the continuity of ownership and the relative stability of the club within the period over the last decade, one might expect to see at least the emergence of a financially healthy club.  The accounts for the period available to me (1999/00 to 2008/09) make interesting reading.

  • Apart for the three years from 2002/03 to 2004/05, a profit has been achieved.  Losses were so great in that period however, a loss of just over £1m in 2002/03 in particular, that the average has been a loss of £137,000 a year.
  • Turnover grew to a peak of almost £8m in 2001/02, with a ten-year average of just under £6m – which is almost exactly the figure for 2008/09.
  • The wages/turnover ratio peaked at almost 73% in 2002/03, but in the past few years has been held at below 50%, a level which is unusually low for an English football club.  It is this figure that no doubt drives the complaints from fans of a lack of ambition.
  • Long-term liabilities leapt in 2003/04 by £1m to £1.4m.  By 2008/09 they had grown to £2.2m.
  • Directors’ remuneration has grown, for 2008/09 being £134,000.
  • There is nothing obvious in the version of the accounts I have seen to substantiate claims that the club is paying Jeff Bonser over £1,000 a day as rental for the stadium.  That said, there is no alternative figure explicitly stated either.

The overall picture is much what one might expect at a club owned by a ‘benefactor’ who is trying to run the club as a business.

The one football source of revenue over which a board does have a major control is matchday receipts.  Average gates at Bescot Park grew at the start of the decade, reaching a peak of just under 8,000 in 2003/04, a season in which the club was relegated from the Championship.  In the season just finished they had fallen 11.9% on the previous season to just over 4,000, putting only Hartlepool with a lower average in League 1, which overall averaged over 9,000 (although it should be remembered that the average is pulled up by the presence of Leeds United, Norwich City, Southampton and Charlton Athletic).

Whether you see a football club as a business, and fans are your ‘customers’, or you see it as a sports organisation which is a focal point of the local community, and your fans are, well, fans, it would not make sense to alienate them and drive away the one source of revenue which have some control over.  Here too there has been a stability in Bonser’s approach.  Consider this quote from him: “I have no intention to justify to anyone how I invest personal money. I have always viewed any personal investment I have made into commercial enterprises as the only way of securing the long-term future of league football for Walsall.”  This is from a statement he made in March 1998, reported in the Sports Argus as he threatened to sell the club.

The same report included the following:

Ken Morrall, chairman of the Supporters Club, who once spent a year on the Walsall FC board as the fans’ representative, hopes any new owner will talk to them.

He said: “Problems started when we asked the football club in 1995 if we could have a little breathing space from paying our £1,000 a month donations while we sorted out our finances.

“We just needed a couple of months, but the next thing we had been served with a writ claiming we had contravened the licence by letting in people who were not members.”

The supporters club claim that over the years they have handed over about £750,000 to help the football club stay in business.

Twelve years on, are relations between board and fans any better?  In a word, no.

Protest is not tolerated at Walsall under Bonser and Chief Executive Roy Whalley.  Banners recently raised against Bonser and manager Chris Hutchings provoked bans (1).  Predictably enough there were further protests at the next home game (2), resulting in more bans.  According to Whalley, the protestors would drive attendances down (3), an interesting example of cognitive dissonance.

At the final home game there was a protest in the form of a sit-in (4).  One fan unfurled a banner, and was ejected by stewards who showed a remarkable failure to notice the irony that the banner read ‘Freedom of Speech’.

Tempers may cool over the summer, but the underlying issues will simply fester.  At the very least, Bonser and Whalley might like to think a little about the advantages of good public relations – they seem to have been off the morning that was covered.  Unless there is some movement in the opposing sides, the club is in danger of ripping itself apart.  For a club with a modern stadium with good facilities for non-football revenue streams, a good measure of stability in terms of where they play in the pyramid, a loyal core fan base and a very clear sense of local identity, this would be just plain ridiculous.  ‘Dialogue not warfare’ would be my choice of banner.  I’m not optimistic though.

[In the light of problems with comments encountered by my friends at Twohundredpercent, I have decided to allow comments, but moderation is likely to take longer than usual for comments from readers unknown to me.]

* Andrew Van-Hagen has kindly contacted me to say that this excellent ‘The Long Road to Bescot’ five-part series, written by ‘Sadlad’, is now available as part of a Memory Lane section on his Walsall Web-Fans Forum: (A), (B), (C), (D) and (E).  Strongly recommended.

Posted in Assets, Benefactors, Censorship, Community, Fans, Identity, Ownership, Public relations, Stadium | Tagged: , , , , , , , , | 4 Comments »

Preston North End shares suspended

Posted by John Beech on May 14, 2010

Preston North End is being reported on the ShareCast website thus:

AIM-quoted PNE, which is managed by Sir Alex Ferguson’s son Darren, has received a winding up petition from HM Revenue and Customs and shares in the Championship football club have been suspended.

More here and here.

The Lancashie Evening Post is reporting that the debt is one for £400,000 to HM Revenue and Customs, that sum being PAYE from April’s wage bill (A).

The reporter, David Seddon, says “I understand that several Football League clubs were hit with similar orders by HMRC at the same time as North End. But Preston are the only PLC of that group of clubs and have therefore had to go public due to stock market rules.”  Watch this space!

PRESTON LATEST – 4 June 2010

Trevor Hemmings, who already owns 28% of the shares in the club through his company Deepdale PNE and has already loaned the club £13m, has now raised his shareholding to 51% (A). His takeover now requires formal approval by the other sharehol

Posted in Debts, HMRC | Tagged: , | 3 Comments »

FIFA’s muscle flexing

Posted by John Beech on May 13, 2010

Given that both tax and transparency are very much flavours of the month in football, it’s surprising that an item on England’s bid for the 2018 World Cup should have provoked so little reaction (1).  In a nutshell, FIFA are demanding that the World Cup should be tax exempt in any hosting country:

“Any host country requires a comprehensive tax exemption to be given to Fifa and further parties involved in the hosting and staging of an event,” said a Fifa spokesman.

Apart from the obvious need for this posting to gain a ‘Chutzpah’ tag, one must wonder why FIFA, a registered charity, should see the need to gain exemptions for ‘further parties’, i.e. players.

No doubt FIFA would argue that a) they need to get the best deal they can and b) in some potential host countries (Qatar seems the most obvious example) the personal income tax rates are considerably lower than in England.

True, but it strikes me that FIFA are really rather getting above themselves in dictating tax arrangements in foreign countries.  They bemoan governmental interference in football, as they have recently made clear by threatening to suspend El Salvador (2), yet apparently feel it perfectly acceptable to interfere with the running of sovereign states.

As if this in itself is not shocking enough, FIFA also insist that such interference remain confidential!

Do they involve relieving the players, possibly even those already resident in the UK, from paying tax on their incomes?

“I’m not able to tell you,” said a spokesman for the England 2018 bid team. “Fifa requires it [the technical bid document] to remain confidential.”

But he stressed that this applied to all conditions, including those applying to visas, work permits, travel, security, banking and foreign currency, commercial rights and broadcasting.

“It is not a selective confidentiality,” he said.

A spokesman for the Department of Culture, Media and Sport (DCMS) said: “I can’t go into detail of any of that because Fifa have very strict confidentiality clauses – but there is always room for manoeuvre.”

It will be interesting to see how our new government addresses this issue as it begins to tackle the budget deficit.  Time for change I would have thought. ;-)

The practical problem in all of this is that, if the UK and other governments with conventional income tax regimes dig their heels in, FIFA may choose just to place the World Cup in oil rich nations in air-conditioned stadiums (see More stadium madness), which would be another step down the road of the Harlem Globetrotterisation of football.

[For an interesting personal view of the way FIFA operates, those who haven't seen it may find Andrew Jennings' Transparency in Football website of interest (now added to my LINKS page.]

UPDATE – 14 May 2010

Cameron has phoned Blatter and said the new government will do “everything in our power” to help the England 2018 bid (A), presumably including facilitating tax avoidance.  HMRC will be pleased.

Posted in 2018, Chutzpah, Ethics, FIFA, Governance, HMRC | Tagged: , , , , , | 1 Comment »

‘Blowing the Whistle’

Posted by John Beech on May 11, 2010

There is a thin line between tax avoidance – the perfectly legal exploitation of the rules of taxation in order to minimise the amount of tax to be paid – and tax evasion – stepping beyond that line into an illegal act in order to escape due tax, and it’s a line that few even approach. Not so in the beautiful game/ugly business.  The attempt to form a CVA by Portsmouth’s Administrator has already raised an issue in this area over the payment to players’ companies of image rights rather than the payment of conventional salaries which are liable to the normal rates of income tax.  Tax issues are also the basis of recent moves by HMRC against Harry Redknapp, Milan Mandarić and Peter Storrie.

Worried that any discussion of the finer points of taxation, and the related subject of club ownership based in offshore tax havens, is going to be unutterably dry and bordering on the incomprehensible?  Wrong!

A new report called ‘Blowing the Whistle: Time’s Up for Financial Secrecy‘ has just been published by Christian Aid, who worked with the Football Supporters Federation and Supporters Direct in its compilation.

The report can be summarised thus:

This report looks at the finances of league football in the UK and the Republic of Ireland – throwing into sharp relief the boardroom shenanigans that have brought a number of clubs to their knees – and it analyses the impact of financial secrecy on football and the developing world.

We are not suggesting that anything illicit or untoward is taking place in the clubs that we identify. We also recognise that some people will use tax havens to reduce tax, rather than conceal information, and that tax reduction will sometimes reflect a genuine shift of economic activity, rather than hidden tax abuse. Our concern, however, is that the opaque nature of tax havens masks the truth, whether or not there is anything to hide.

With the World Cup in mind, we also present the host country South Africa as a case history, looking at what financial secrecy means to the most powerful economy on the African continent.

Among the findings are:

Manchester United, recently pipped to the Premier League title, [is] still top a new Football Secrecy League.

A further 14 Premier League clubs and another 10 from around Britain and Ireland are effectively based in tax havens.

It also explains how financial secrecy means trade-related tax-dodging costs poor countries $160bn every year.

This is one-and-a-half-times the global aid budget, and enough, if used according to current spending patterns, to save the lives of 350,000 children under five.

The clubs are named by the way.

The style of the report is eminently accessible – you certainly don’t need to be an accountant to understand it – notwithstanding that it was researched by two Fellows of the Institute of Chartered Accountants in England and Wales.  Download it now!

Also out is a report called Player and Referee, Conflicting Interests and the 2010 Fifa World Cup by South Africa’s Institute of Security Studies which, through a series of case studies looks at some worrying aspects of the imminent event (direct download here).

Both reports are available directly through links on my LINKS webpage, in a section of Reports which I will be expanding in the immediate future.

Posted in Corruption, Governance, HMRC, Ownership | Tagged: , , , | Leave a Comment »

Premier League v. Football League

Posted by John Beech on May 10, 2010

Once again, the Premier League, or ‘the Wild East’ as Arsenal’s Stan Kronke has amusingly christened them (1), have made clear their naked desire to control football down the pyramid.  They have long attempted to distort competition in the Championship by paying parachute payments (as a reward for failure?!) to their unfortunate ‘old boys’ (see Parachute payments, and Rocket payments?) and more recently have started what they outrageously call ‘solidarity payments’.  If Lech Wałęsa was dead, he’d be spinning in his grave at this abuse of language.

If you do not doubt the sincerity of the Premier League, you might reflect on the fact that the Premier League, threatened by the possible restriction on their money printing press of broadcasting rights, trotted out the argument that “grass roots of sport will suffer and be irreparably damaged through loss of funding” (2).  Threat or promise?  Sky, their ‘partners in crime’, claimed that OFCOM’s involvement was an “unwarranted intervention“.  Warranted by Act of Parliament actually, even if unwelcome by Murdoch’s media empire.  ;-)  The intervention follows a three-year enquiry by the way.

In 2007 the Premier League offered the Football League a ‘solidarity package’ of over £90m, in the context of almost £3m windfall for their television deals (both figures covering a three year period) (3).   The latest outburst of Premier League hegemony started at the end of March (4).  The ‘offer’ that was put to the Football League was increased parachute payments to PL relegated clubs of £16m per year for four years, and non-parachute payments offered were £2.2m per season (an increase from the previous £830,000) for Championship clubs, £325,000 for League 1 clubs, and £250,000 for League 2 clubs (5).

Now, on the face of it, this may sound a generous offer.  But there are a couple of obvious problems with it.

First, it would at least be theoretically possible that a club might suffer three consecutive relegations and find itself in the Conference with a PL parachute payment of £16m.  Now that would seem really fair to the other Conference clubs.  It’s an unlikely scenario I grant you – the club would have had to have been really bad to have suffered three consecutive relegations with all that extra money splashing around with which to buy players.  But that is exactly my point – this extra money is precisely designed to distort competition and save the PL old boys from suffering too much in the harsh reality of the Football League.

Secondly the Premier League is giving the money not to the Football League but to its clubs, defining how much, and to whom, and when. Surely those are issues that the Football League should have control over rather than the Premier League.  If you doubt this, consider the logical corollary for the redistribution of wealth between the two – the Football League imposing a levy on clubs promoted to the Premier League, for up to four years.  Of course it’s not going to happen – the difference in affluence and hence power is way too great.

Which brings us to the third point.  The rates at which the Premier League has set the payments to Tiers 2, 3 and 4, is likely to increase the wealth differentials and make it harder for the lower clubs to climb the pyramid.

It was a ‘take-it-or-leave-it’ offer, such is the arrogance of the Premier League, which might perhaps have just nudged the decision to the ‘accept’ decision which the Football League came (6) to at what has been reported as a rather stormy meeting .  Already League 2’s Lincoln City chairman Steff Wright has stuck his head above the parapet:

Wright told BBC Lincolnshire: “It was a take it or leave it deal we were given.

“League One and League Two clubs felt the money should have been more fairly distributed throughout the Football League and that hasn’t happened.”

Wright added: “I think it’s a massive disappointment. Fairness and equality have gone out of the window.”

And he fears the system would create a second-level Premier League by stealth.

“In a few seasons’ time the top of the Championship will be dominated by teams who’ve benefited from these parachute payments”, he said.

“Nobody’s arguing against the idea of more money coming down but it’s the way that that will now distort the Football League.

“Instead of there being a problem between the clubs that have the money in the Premier League and the clubs without in the Championship, you now have that problem moved further down the league.

“It will make it more difficult for clubs like Lincoln to get promoted to League One and eventually find their way into the Championship.” (7)

Well said, Steff.  Let’s hope Spain’s La Liga are listening.  Incredibally they have just announced that they are to form a breakaway copy of the Premier League – “The new system of organisation and development will allow a much more attractive and better-run competition than the current one” they reckon (8).  If only, if only…


PL v. FL UPDATE – 10 May 2010

An interesting example of how the power positions of the governing bodies are viewed – VisitBritain is jumping on the World Cup bandwagon with a series of interviews of players from overseas, getting them to talk about where they like to visit in Britain (1).  To do this, they’ve partnered not with the FA or even the PFA, let alone with governing bodies other than in England, but with the Premier League.

The promotion is online at http://www.visitbritain.com/football, but when you click through the URL you are auto-redirected to betrays how VisitBritain, ‘the official website for travel and tourism in the UK [sic] (2) view, and promote,  ‘Football in the UK’ and ‘Premier League’ as synonyms. Mind you, given that they seem to treat ‘England’, ‘Britain’, and ‘United Kingdom’, theyare at least consistently inaccurate.

Posted in Ethics, Football League, Governance, Premier League, Pyramid movement | Tagged: , , , , | 1 Comment »

Farewell to Preston

Posted by John Beech on May 9, 2010

Without a great deal of publicity, at the end of April the National Football Museum closed its doors at the Deepdale Stadium in Preston. Anyone wishing to pay an act of homage to the great history and heritage of English football will now have to wait until Autumn of next year when it will reopen in Manchester.

I’ve no wish to reopen debate on why this move is taking place, and in any case it is too late to change the plans, other than to say that I thought a move to London, as proposed by Brian Mawhinney (1), was a non-starter – the Ribble Valley and Preston in particular is to me, a born and bred Southerner, the spiritual home of professional football, and still the home of the Football League.  I would however offer some thoughts on what is happening.

To any visitor, the site at Deepdale struck as sub-optimal.  The layout of the Museum was quirky, resulting from it being wedged into a Championship stadium, and space was cramped, resulting in a high ratio of reserve material to material on display.

A move to London would certainly have been inappropriate, but I’m not 100% convinced that Manchester is the right location.  Is it any more appropriate than say Liverpool, with all the talk of a new ‘Football Quarter‘?  Personally I would have preferred it stay in Preston but in a new custom-built centre.

Apart from the fact that the Museum is now closed for over a year – surely to goodness this could have been avoided – there is a second negative impact as a result of the move.  The National Football Museum has established a strong partnership with the University of Central Lancashire’s International Football Institute, a synergy which has already generated some very useful research and publications.  Although this synergy should in theory continue unabated, I can’t help feeling that the Museum and the research activity will tend to drift apart and that work for my colleagues at UCLan will be just that bit more problematic, neither of which is a positive step.

I suppose we should just be grateful that the Premier League haven’t stepped in with an utterly selfless gesture to house it in a cellar in Gloucester Place.

Posted in Governance, History | Tagged: , | Leave a Comment »

Portsmouth’s parlous progress

Posted by John Beech on May 7, 2010

I guess yesterday was a good day to bury news on, what with the no small matter of a General Election.  It was, by I’m sure complete coincidence, the day of the first meeting between Portsmouth’s Administrators (there mob-handed rather than the usual solo appearance of Andrew Andronikou) and the club’s creditors to discuss a CVA proposal.  Press reporters were banned from reporting the meeting verbatim (but, on a big plus side, were allowed to attend), and we should be grateful to Nick Szczepanik of The Times and Matt Slater of the BBC who considerably enlivened a dreary afternoon with their tweeting.

As a seasoned Pompey observer, it of course came as no surprise to learn that debts had grown again, now to £138m (1).  Equally predictably, there were surprises in the detail.

An extra debt of £17m to HMRC has emerged.  The figure consists of not only an unsurprising amount of interest charges, but also claims for tax liable on payments to players for image rights.  The latter opens a whole new war front by HMRC, attempting to move this practice which is widespread in the football sector from the realms of tax avoidance, which is perfectly legal, to those of tax evasion, which is not.  If this claim is successful, it will have profound implications for clubs from the Premier League down to League 2, where newly-promoted Notts County have not been able to hide the practice with respect to Sol Campbell, albeit rather briefly at the start of the current season (2).

Even by Pompey’s surreal standards, the most extraordinary new debt is a claim for £50m from the Football League Pension Fund.  Seemed frankly incredible, as Portsmouth last played in the Football League in season 2002/03 and their wages bill for that season was less than £14m.  This pension fund is in fact for non-playing employees, which would make the figure of £50m even more ludicrous even allowing for Peter Storrie’s salary.  Andrew Andronikou has suggested that the actual figure is in fact a rather more modest £34,000 (3).

The proposed minimum payment of 20p in the £ over five years looks likely to be accepted formally, but HMRC have managed to negotiate at least one key condition.  The current club is to be liquidated within nine months (doubtless triggering an investigation into how it was run) and the CVA transferred to a new company (4).  This scenario assumes that a new owner has emerged by then, and the formal acceptance of a CVA makes this more likely.

One crumb of comfort to emerge is that Balran Chainrai has agreed to personally pay off in full debts to charities  and to all creditors owed less than £2,500 (5) as a goodwill gesture.  These include British Gas, BT, Dairy Crest, Holiday Inn, Jobsite, Mercedes Benz,and Qatar Airways (who are owed 20p apparently) as well as a number of local small businesses.  It also excludes local businesses owed more than £25,000 of course.

Andrew Andronikou has set a harsh but realistic (for a Championship club) wages cap for next season of £10,000 in total per week (6).  His stark message to players is “Like it or lump it“.  Any notion of ‘bouncing back’ seems increasingly to be in cloud cuckoo land.  A bit like the country in post-election ‘hung parliament’ mode really.


PORTSMOUTH’S PROGRESS UPDATE – 9 May 2010

Not altogether surprisingly, The Independent on Sunday is reporting that Portsmouth are to challenge HMRC’s claim regarding image rights (A) in what will be a very important test case with potentially major ramifications for many, many clubs.  The same report suggests that a secvret deal is being negotiated between the Administrator and the so-far unsympathetic Premier League.  One to watch…


PORTSMOUTH’S PROGRESS UPDATE 2 – 17 May 2010

Offshore payments to players is the thrust of a new initiative by HMRC it would seem.  Glasgow Rangers are are reported (B) to have been hit with a tax bill which includes £24m for such payments made in the last decade.

Posted in Debts, HMRC, Insolvency | Tagged: , , | 10 Comments »

The curious case of Cardiff

Posted by John Beech on May 7, 2010

So, Cardiff City have not finally settled their tax bill with HMRC and thus have not yet avoided the possibility at least of being wound up (1).  Everything is not yet rosy in spite of the wonder Malaysian cash injection, which presumably is still in the post.  At the previous court appearance the club was given 56 days and told that it was their ‘last chance’.  This time the adjournment is being marked as ‘final’ apparently.  How we debase our language.  It would seem that HMRC were convinced that this time the investment is indeed imminent, and for once they did not oppose an extension.

There is good news nonetheless –  the Spinmeister Peter Ridsdale is to go on May 31st., reportedly as a condition for the injection of £6m by Malaysians Datuk Chan Tien Ghee (TG) and Tan Sri Dato Seri Vincent Tan Chee Yioun (Vincent Tan) (2).

Ridsdale’s reaction, surprisingly muted by his normal standards, has been pretty predictable -“My time in Cardiff has been an enormous challenge, but one that we have successfully risen to and one that leaves the infrastructure in place to continue with forward momentum. It is with sadness, but great pride, I hand over to a fresh management team.

The club assesses Ridsdale against his initial brief thus: “Firstly, to assist in the construction of the new stadium, secondly to establish the Football Club within the Football League Championship, and thirdly to seek new funding. All three of these will have been completed by the shareholder meeting” (4).

Well, the stadium has indeed been built, but at what price?  That of a crippling debt to Langston which has the club has only lately started playing off.  As for the new funding, TG was drawn to Cardiff because his son was offered a trial there (5), and it was only at a later stage that Cardiff director Alan Whiteley introduced TG to Ridsdale.

I just wonder which of the following recent incidents alone give Ridsdale his great pride:

  • March 2008: Langston take the club to court over lack of any repayments on the loan.  The court finds for the club, but the pressure is now on to actually repay some money.  It has cost the club £500,000 to fight the case.
  • July 2008: The club announces losses for 2006/07 of almost £5m (6)
  • May 2009: Losses for 2007/08 are £1.5m (7).  Attendances were down by 8%.  Ridsdale took a pay cut as the income paid to WH Sport – his consultancy firm – fell from just over £1m in the previous year to £325,000.
  • June 2009: Ridsdale rejects claims that WH Sport are going bust.  The company had “merely stopped trading because he is now on the payroll at Cardiff City and the outstanding monies [nearly £374,000 to the Inland Revenue and £36,000 to other creditors]are in the process of being paid” (8).
  • August 2009: Ridsdale vows to “pay more than £370,000 he personally owes to the tax authorities by the end of this year” (9).  In 2006/07 WH Sports was paid £1,034,490 for Ridsdale’s services to the club. That included a bonus of £500,000, paid to him for saving the club from liquidation.
  • September 2009: A club sponsorship deal for £250,000 is signed with 777ball.com (10).  Less than aweek later 777ball.com’s logo is withdrawn from the club’s shirts as the sponsor does not have authorisation to advertise in Europe (11).
  • October 2009: Ridsdale announces a five-year freeze on season ticket prices for 10,000 people (12).
  • November 2009: The club is given a 70-day adjournment of a winding-up petition brought by HMRC (13).  The club website insists “Today’s court order had the effect of withdrawing the threat of a winding-up order rather than imposing it… Cardiff City Football Club have every confidence in their future financial stability and fully expect to be in a position to make further investment in its playing squad in the January transfer window” (14).
  • December 2009:  The winding-up petition is formally dismissed as a repayment schedule has been agreed with HMRC (15).  According to Ridsdale, “this puts any doubts that anybody had about the future of the club behind us” (16).
  • January 2010: The News of the World reports that the club has failed to make the first payment to HMRC as agreed, and faces a new winding-up petition (17).  The club’s response is that “We are happy that Cardiff City Football Club’s relationships with its creditors including HMRC are such that we will not have any financial issues that will affect the ability of the club to continue to trade as normal in all aspects of its business.” (18).  A week later it is revealed that a second winding-up petition had been issued before Christmas (19).  Ridsdale now insists “We have every confidence that all monies owing to HMRC will have been repaid by the end of January” (20).
    £3m raised from the sale of future season tickets will not now be spent on bolstering the squad as previously indicated; it will used to reduce debts.  Those who bought the season tickets are not amused.
  • February 2010: With only £1m of the £2.7m tax bill paid, a further adjournment is granted, this time for 28 days (21).
    The season ticket debacle is raised in the Welsh Assembly (22).
    It emerges that the club’s stadium subsidiary faces a winding-up petition over a £700,000 debt in connection with catering equipment (23).
  • March 2010: The Football Association of Wales complain that Cardiff City have not paid them money for a friendly international played at the club’s stadium in November.  A club spokesman is “surprised” (24).  Ridsdale explains to WalesOnlineIf you are asking whether we still owe money to the FAW from the Scotland match then yes, we do. But that is only because we have not done the reconciliation [on the gate receipts]” (25).
    The club launches another drive to sell season tickets (26).
    The club faces HMRC in court again and are given a 56-day adjournment.  HMRC’s barrister describes Cardiff City as “plainly insolvent” (27).

Which brings us back to the current (fourth) adjournment.  In case you had forgotten, I was wondering what it was that gave Ridsdale his great pride.

It would seem that for once the adjournment actually is a technicality.  The Malaysian investment has come in the nick of time.  However, £6m is only just beginning to look at the club’s debts, and it remains to be seen whether the future level of investment will prove adequate.  Let us hope so for the long-suffering fans’ sake.

For other clubs, there is a warning – Watch out! There’s a Ridsdale about!  He might want to spend five years ending in great pride at a club near you.

Steve Tucker of the South Wales Echo summed up Ridsdale’s impact on Cardiff City rather neatly: “In the end Ridsdale’s tenure was a rollercoaster ride for supporters. But, like any rollercoaster, it is one many people will get off nauseous and relieved … and probably reflecting that the lows in many ways out-weighed the highs” (28).

There is one bit of bad news for Cardiff however.  Having announced his departure, within a matter of days it is announced that he will continue to be involved with the club, offering free advice on transfer activity (29).  Just how much free Ridsdale advice can a club afford?


CARDIFF UPDATE – 11 June 2010

The club is now reported as having settled its £1.9m debt to HMRC (A).  It strikes me as at least slightly curious that it has taken so long.

The new regime seem set to continue the tradition of spinning so strongly established over the last few years.  New Chief Executive Officer Gethin Jenkins told an EGM on May 27: “Going into last weekend the level of enthusiasm for the club was clear as we broke season ticket records, coming close to 16,000 sold excluding corporate sales. This enthusiasm has been matched by increased commercial interest from businesses across South Wales” (B).  Nothing to do with Peter Ridsdale misleading fans on how the income would be spent then.


CARDIFF UPDATE – 16 June 2010

At the High Court today HMRC officially withdrew their winding-up petition over the £1.9m tax bill, this being the club’s fifth appearance in court (C). The club will however have to pay legal costs.

Further update same day:

This has been announced on the club website (D), although no mention of the order for costs. The statement speaks of “look[ing] forward to the season and to develop our ongoing recruitment plans“. If I were a Cardiff fan I think I would have be hoping for a statement that included something along the lines of “We now have a sustainable business plan that will ensure we pay off our debt to Langston on schedule, and that we will avoid any winding-up petitions in the future“.

Posted in Chutzpah, Debts, HMRC, Insolvency | Tagged: , , , | 4 Comments »

Whelan and Wigan

Posted by John Beech on May 4, 2010

With reform of football being part of the current zeitgeist, and political parties showing some interest in the topic at least until Thursday evening (see The Times They Are A-Changin’ 3, it does not come as a complete surprise that the Premier League, in the form of certain of its club Chairmen, should begin to stick their heads above the parapet and start using the R word – that’s as in Reform, rather than Relegation.  Wigan Athletic’s Dave Whelan has made the early running.

He is reported by euFootball.biz as saying on the subject of debt “People say the Premier League has got to be curtailed in what it can do and what it can’t do but it’s no use just saying ‘Don’t interfere’….As a league, you just can’t have clubs going into administration. Let’s get a figure, 20 or 25 per cent, and say that you can’t borrow any more than that percentage of your turnover.” (1).  For the clubs that fail to comply he suggests “If you do that you get penalty points. That would clamp on everything. That gives the bigger clubs greater scope to borrow money and it puts a restriction on smaller clubs like us, Hull and Portsmouth“.

Not only has he failed to spot that Portsmouth’s nine point deduction did not actually punish them by condemning them to relegation – they are relegated already even if the nine points were to be magically restored – but he fails to appreciate that points deduction is essentially dysfunctional as a sanction (see my research on this here if you have any lingering doubts).

He also seems to have conveniently forgotten how Wigan, a Northern Premier league club until 1978, comes to be in the Premier League.  Whelan bought he club in 1995 when they were in the old Division 3, then the fourth tier.  The club’s accounts give an interesting picture of how they have climbed to the top.  The club managed to grow its turnover slowly but steadily, reaching a level of just over £4m in 2004/05, the season in which they won the Championship.  Since then, turnover, having made the obvious initial leap with greatly enhanced broadcasting revenues through PL membership, has continued to rise steadily, reaching £46m for 2008/09. the most recent season for which financial data is currently available.

Has the meteoric rise been financed from revenues, without the acquisition of large debts?  In Whellan’s words “The club owe me something like £50m to £60m and I’m turning that into shares so that if I sell them it doesn’t affect the football club. I’ll never get all my money back” (2).  I’m sure it’s his natural modesty that stops him mentioning in this statement of his own largesse, putting him in the same mold as, well, if not quite Abramovich then almost in the league of Middlesbrough’s Steve Gibson, that it comes entirely coincidentally with his appearance at No.1 in the new Sunday Times Sport Rich List (3).

But what of Wigan’s debts?  Their accounts make no mention of any directors’ loans, suggesting that a more accurate statement would have been that the club owes Whelan’s companies £50m to £60m.

Wigan’s long-term liabilities were £8m in 1999/00, and have grown steadily since, standing at £47m in 2008/09, together with current liabilities of £42m.  With a turnover of £46m for the same period, it’s rather hard to see where he has plucked this figure of 25% of turnover being the upper limit of debt that he is so strongly advocating.

Wigan Athletic is then perhaps not a model of best practice for others to follow.  Neither is it with respect to the other plank of UEFA’s Financial Fair Play Protocol – keeping wages to within 60% of revenues.  For 2008/09 Wigan’s ratio was 81.5%.  In 2004/05 when they won the Championship and gained promotion to the Premier League, they spent over £8m on wages and salaries against revenues of just over £4m – the ratio was actually 204.3%, which makes ‘cheating’ Portsmouth’s profligacy with money it ‘didn’t have’ and a ratio of 109% seem almost modest.

Not that any of this necessarily detracts from the argument Whelan is making; it merely raises questions about the advocate.  Debt is undoubtedly out of control in the majority of Premier League clubs, and some means of reigning in that in, and preventing its recurrence, is sorely needed.

To me however the source of the problem lies not in the principle of debt per se – there is absolutely no sound argument that can be made, for example, against Arsenal borrowing money to finance the Emirates with a sound business model to sustain the debt – but in the source of the money borrowed.  When ‘benefactors’ ‘invest’ in clubs, there is no rigorous examination of whether the debt is sustainable, and the lender is in effect the guarantor of the loan!

A debt cap certainly has its attractions, but until clubs are only allowed to incur debt by borrowing from independent sources who will scrutinise whether there is an effective business model in place to ensure that the debt is repaid, we will continue to see wide-scale financial doping, and the occasional ‘victim’ of ‘benefactors’ who either can’t or won’t continue pouring money into their club.

Posted in Benefactors, Debts, Governance, Premier League, UEFA, Wages | Tagged: , , , , , | Leave a Comment »

 
Follow

Get every new post delivered to your Inbox.

Join 128 other followers

%d bloggers like this: